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Route to Market & Supply Chain Blog

Do I really need S&OP? 3 Questions to Answer

Posted by Michael Thompson on Thu, May 05, 2022

There was an excellent article from McKinsey published on 2 March 2022 entitled: “Autonomous supply chain planning for consumer goods companies

It contained the strap line: “Rethink Traditional Processes”.

Based on research undertaken in Asia with large Consumer Packaged companies, the article stated that “approximately 80% of companies still follow traditional or collaborative sales and operations planning (S&OP) processes, with limited real-time decision making or automation.”

Reflecting on this, I wondered if FMCG companies should be bothering with their current S&OP processes.

The answer to my own question is this. It depends on the extent to which your supply chains are optimised based on your current S&OP processes and the technology that you currently utilise.

fmcg-sop-3-qa-mt-in-post

So I offer the following simple three questions:

  1. INVENTORY. Do we have inventory levels at or below sector best practice levels? Focus on finished goods.
  2. COSTS. Is our total supply chain costs as a percentage of sales at or below sector best practice levels? Consider also Total Cost to Serve.
  3. SERVICE LEVELS. Are we satisfied with our service levels to our immediate customers. The key metric is OTIF or On Time in Full. Consider also, any out of stock at the point of sale.

If you have answered ‘yes’ to each of the above, congratulations, your supply chain is working well – you almost certainly have a well-oiled S&OP and should indeed be looking at Continuous S&OP or Autonomous Planning as advised by McKinsey.

If you have answered ‘no’ to any, either you don’t have S&OP or it is not working properly. In this case it is time to examine your S&OP and make the required changes.

If you need any help on any supply chain or route to market issues, please reach out to me directly.

Tags: Michael Thompson, Supply Chain Strategy

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